Debate on Centralization Intensifies as US Approves Spot Ether ETFs
Summary:
The approval of spot Ether exchange-traded funds (ETFs) in the US has sparked debate about the potential centralization of cryptocurrencies. Industry leaders like Mona El Isa of Avantgarde Finance and Josef Tětek of Trezor argue that ETFs may undermine the core benefits of decentralized cryptocurrencies and may discourage self-custody of coins, posing potential risks. However, the overall industry sentiment remains positive with prospects of DeFi, NFTs, and other token-based applications gaining momentum.
As the US approves the spot Ether exchange-traded funds (ETFs), it raises cheer among many, yet a certain industry leader raises an eyebrow at the centralised nature of these funds. With the arrival of digital currencies such as Bitcoin and Ether, the financial sector has seen a massive turnover, lessening the need for intermediaries and enabling transactions without the requirement of a centralised authority. However, with the introduction of ETFs, there is a potential risk of digital currencies becoming centralised once more, says Mona El Isa, Avantgarde Finance's founder.
According to El Isa, the introduction of older technology back into crypto products is a move by ETF issuers to remain relevant, which in turn undercuts the purpose of cryptocurrencies. The Ether ETF is appealing to traditional finance as the structure and regulations of ETFs resonate with the principles of traditional finance.
El Isa argues that accessing Ethereum via an ETF overlooks the key advantages offered by Ethereum's decentralised and disintermediated design. She opines that while the newly approved product will get some adoption, it is likely that investors will lean towards self-custody over holding ETFs due to the benefits it offers.
El Isa elaborates that noncustodial or self-custodial crypto wallets, which give users the control to hold their Bitcoin by being responsible for the private key or the actual asset, are a better option. Spot crypto ETFs, contrarily, do not give investors the chance to hold the cryptocurrency as they rely on third-party custodians like Coinbase.
Ether's ETF approval instigated excitement among investors and a debate on centralisation. However, with the challenges Ethereum is facing, one instance being Buterin addressing MEV and liquid staking, keeping the balance to maintain the decentralised and democratic nature of Ethereum seems to be a prolonged battle, as pointed out by Hao Yang, the Head of Financial Products at Bybit.
Josef Tětek, a Bitcoin analyst at the hardware crypto wallet company Trezor, also expressed concern over crypto ETFs due to centralisation worries. Tětek argues that spot Bitcoin ETFs might move investors away from self-custody or even generate “millions of unbacked Bitcoin.” Trezor's CEO Matej Zak highlighted the risk of spot crypto ETFs being susceptible to hacks when the underlying cryptocurrency of an ETF is stored on platforms like Coinbase. However, issuers maintain that there is no direct competition between self-custody and spot crypto ETFs.
Published At
5/24/2024 3:29:49 PM
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